Doing Business in China: Etiquette Rules to Keep in Mind

Developing some insights into Chinese culture and business etiquette can help you when doing business in China. Check out two concepts that drive business protocol in China.
May 25, 2018

Observing cultural etiquette when doing business in China may be as important as having the knowledge of the market you're pursuing. That's because doing business in China is often relationship based.

A strong relationship with your Chinese business counterparts can help smooth business interactions. Practicing a few important business etiquette rules can be an integral part of cementing these good relationships.

Chinese culture today is a hybrid of long-standing customs and Westernized lifestyle. Two major concepts of Chinese business culture revolve around the notions of guanxi, meaning "relationship" (pronounced as gwan shee) and mianzi, meaning "face" (pronounced as Me ENN dzuh.)

A few etiquette rules based on these overarching concepts can help you succeed in navigating the softer side of doing business in China.

The Concept of Guanxi, or Relationship

Guanxi is a Chinese term meaning "networks" or "connections." In Guanxi and Business, distinguished chair and professor of management Yadong Luo, at the Miami Business School, defines guanxi as the concept of “drawing on connections in order to secure favors in personal relations. . . It contains implicit mutual obligations, assurances, and understanding and governs Chinese attitude toward long-term social and business relationships."

Broadly, guanxi is a linkage of social networks and influential relationships that facilitate business dealings. 

Consider making efforts to maintain the connection with your Chinese counterparts. If you say "Let's stay in touch," it's important to mean it and follow up on it to keep your guanxi alive.

A focus on obtaining the right guanxi may help in getting business done. Of course, guanxi alone is not a determinant for success. All other important requirements of the business—whether it's technology or management practices—need to be in place, too. But good guanxi can help smooth the way and may make it more enjoyable for all parties doing business, whether it's with partners, suppliers or customers.

There are several ways to strengthen your guanxi. Here are three principal considerations:

1. Gift giving to express appreciation and respect.

"In the U.S. we think about giving gifts to people who are close to us for special occasions like birthdays or anniversaries or certain religious holidays. But in China gifts are a way of establishing a relationship and are far more common," says May-Lee Chai. (Chai received her M.A. in East Asian Studies from Yale University and has authored eight books, including several on China.)

"For example," she continues, "during holidays, Chinese people might give gifts of foods to almost everyone they know from colleagues at work to extended family, neighbors, teachers, etc. Chinese business people give gifts of banquets for colleagues, employees and especially potential business partners; they may also give personal gifts like watches and purses to business partners for their spouses or family members, things that show respect and a willingness to do business with someone else.

May Lee Chai

"Non-Chinese people, however, shouldn't give big gifts because that can be against the law," Chai adds. "Extravagant gifts can look like bribes. Small mementos—pens with company logos, other mementos with their company logos—are fine."

Check out Chinese laws governing gift giving, whether it's to a business or a government official, to ensure that you respect the local laws and don't unwittingly make a mistake.

Thoughtful gift giving can be a way to enhance guanxi. Gifts are generally given at the end of an introductory meeting or dinner, at contract signings or at the completion of important milestones in projects.

Chai also mentions the importance of the color red in China.

"Red is the most important color in Chinese culture," Chai says. "It is associated with the Lunar New Year festivities, where red decorations and firecracker wrappers bring good luck for the new year. Red and pink signify luck, prosperity and success."

Taking this as an inspiration, you might consider wrapping your gifts in red. This could be seen as a thoughtful touch.

When giving or receiving a gift, do it with both hands. It's usually a sign of respect and appreciation to do so.

2. Eating and drinking together to develop the relationship.

When doing business in China, a lot of relationship development is done over sharing food.

"Sharing food is one of the most important ways that Chinese establish and maintain relationships at every level of society," Chai explains. "The way Americans go to bars to drink and socialize, Chinese go together for full meals.

"It's expected that everyone will compete to pay for the bill—dividing the bill evenly among party goers is not done," she continues. "It's also important to remember who paid the bill and vie extra hard next time to pay for the bill when that person is present. Paying for friends' and business associates' meals in group settings is an essential way of showing and maintaining close ties."

As banquets are generally a part of doing business in China, you're most likely to be treated to a banquet. If you're invited to a banquet, note that seating arrangements at these affairs may be determined by the social status of participants.

The seat of honor may be designated for the host or a VIP chosen by the host. Guests with senior positions may be seated to the right and left sides of the host. Remaining guests may be seated in accordance with their position in the hierarchy. You can use this as a guideline if you host a banquet for your Chinese clients.

3. Take steps to build the relationship for the long-term.

When doing business in China, it's important to be mindful of developing the relationship for the long-term.

Consider making efforts to maintain the connection with your Chinese counterparts. If you say "Let's stay in touch," it's important to mean it and follow up on it to keep your guanxi alive. This can easily be done with sending the occasional email or telephone call, remembering to send birthday wishes and honoring special Chinese holidays such as the Chinese New Year.

Sincerity is a key aspect of true guanxi. Business relationships in China are almost always personal and often become social relationships. As Diego Gilardoni, author of the 2017 book Decoding China puts it, "the Chinese do business with you, not with your company."

The Concept of Mianzi, or Face

A key aspect of Chinese culture is the pervasive concept of "face," which loosely refers to someone's social standing, reputation and honor.

This concept generates codes of behavior that are central in Chinese society. They have to do with losing face and giving face.

Joshua Freedman

Losing Face

Losing face is about dents that can happen in a person's status. (Basically it's about not looking bad.)

When doing business in China, it's important to be mindful of behaviors that can unwittingly have a negative impact on someone else's concept of face. While in the U.S. we may have a practice of being upfront and direct with constructive criticism, in China this may not go down well.

"It's important always to consider the mianzi or 'face' of the other person," Chai says. "Therefore directly criticizing someone in front of others can be devastating to a relationship. It can be seen as a sign of disrespect, or worse as an attempt to harm someone else's reputation. Better to find a way to provide constructive criticism through a third party or wait till you can talk privately with someone."

Giving Face

A related concept is the importance of giving face. This is about giving the other person a feeling of respect and making them feel important and valued. A lot of the prescribed etiquette of showing some deference for older or more senior people in Chinese society and business circles can be a part of what's interpreted as giving people face.

Think about ways that you can give face to your Chinese counterparts, for example, how you can genuinely boost their reputation or prestige in front of their superiors or peers. Consider any ways that you can show your confidence in them.

"'Face' is about safety and respect," says Joshua Freedman, CEO of Six Seconds: The Emotional Intelligence Network, a U.S. based company with operations in China. "Help others look good and feel good by recognizing their value and letting others see you value the person. Create a win-win situation by given them credit or praise for their contribution, and discuss any criticisms or failures in private. This kind of respect is useful everywhere in the world, and essential in China."

Giving face is an opportunity to build trust and goodwill and to further enhance your guanxi.

Ultimately, navigating protocol when doing business in China comes down to understanding that human feelings often come first. Respect for people's feelings, as manifested in issues related to face or guanxi, should be one of the primary considerations.

Read more articles on leadership skills.

Photo: Getty Images; May Lee Chai; Joshua Freedman